short ES sep @1250 long es dec @1245 short sep 1255 put @37 short dec 1240 call @65 rationale: selling options and profiting from deflating time value will do more calculation which series to sell to have the maximum profit from time value and volatility any suggestions are more than welcome
1 of the problems is obvious right now as the put or call moves more in to the money, the 1 leg appreciates faster than the other which is the case of the put at the moment
Short sep futures+short sep 1255 put=short sep 1255 call. Long dec futures+short dec 1240 call=short dec 1240 put. So, your position reduces to a "calendarized short strangle".
how can it be naked? the short put is covered by the short fut and the short call is covered by the long fut
The resulting position I have mentioned is a synthetic position. Your 4 positions synthetically reduce to 2 naked short option positions. In other words, instead of trading this: short ES sep @1250 long es dec @1245 short sep 1255 put @37 short dec 1240 call @65 You can trade the following: short sep 1255 call short dec 1240 put and achieve the same position.
but if i were to be short the dec 1240 put straight out and say a bomb would explode and the sp would trade at 600, my losses would be enormous were as now, i am short the fut contract